Good help is so hard to find these days. If the adjectives "high net worth" or "affluent" (euphemisms for "filthy rich" in professional money manager land) can't be used in the same sentence as your name, then much of the financial services industry will tell you, thanks, but you're on your own.
Ah, but don't worry. Even if you don't earn six figures and have $100,000 to $1 million in investible assets, someone somewhere is willing to offer you money advice for a fee. A good financial pro -- one who shows customers the path to financial freedom and steers them successfully through every turn -- has a much bigger impact on clients with limited capital than those who are ultra-rich.
But that's also the rub: The less you have, the more you have to lose. Each little misstep has greater ramifications on a single-income family of four living on $40,000 than it does on a $4 million household.
Good help may be hard to find, but bad advice is everywhere.
Back-alley credit help
Got debt? Credit counselors are standing by to take your phone call. There are plenty to choose from. Ten years ago, there were just 200 debt management firms. Today, there are more than 1,000. What's your pleasure? Face-to-face service? Phone-based meetings? Online one-on-one advice? Have it your way -- help is delivered almost any way you want it.
But you might not want it. A 2003 study by the Consumer Federation of America found that unlike the previous generation of mostly creditor-funded counseling services, a new generation of agencies often harms debtors with improper advice, deceptive practices, excessive fees, and abuse of the nonprofit status.
More than 9 million consumers turn to credit repair agencies for help. If you do, here are seven warning signs to help you avoid the kind of heartache bad help brings:
1. High fees. In general, if the setup fee for a debt management plan (also known as debt consolidation) is more than $50 and monthly fees are higher than $25, look for a better deal.
2. "Voluntary" fees that aren't so voluntary. Some agencies publicly claim that their fees are voluntary but don't pass this information on to consumers. Others will tell you that their fees are voluntary, but they'll put a lot of pressure on you to pay the full fee.
3. The hard sell. If the person at the other end of the line is reading from a script and aggressively pushing debt "savings" or the possibility of a future "consolidation" loan, hang up.
4. Employees paid by commission. Employees who receive commissions for placing consumers in debt management plans are more likely to be focusing on their own wallets than yours.
5. Trigger-happy sales tactics. Any agency that offers you a debt management plan in less than 20 minutes hasn't spent enough time looking at your finances. An effective counseling session, whether on the phone or in person, takes a significant amount of time, generally 30 to 90 minutes.
6. A one-size-fits-all plan. The agency should see whether a debt management plan is appropriate for you, rather than assume that it is. If it doesn't offer any educational options, such as classes or budget counseling, consider one that does.
7. Aggressive ads. Don't just respond to TV and Internet advertising or telemarketing calls. Get referrals from friends or family, find out which agencies have been subject to complaints, and talk to a number of agencies before making a decision.
Before you pick up the phone, read our free Get Out of Debt Guide (and be sure to download the free .pdf file workbook).
Get rich the EZ way!
Many of the same warning signs pop up when you're looking for other kinds of money help. The most common, however, is a salesperson padding his commission check by selling you financial products you don't need. (That's why I'm partial to fee-only advice such as that offered by TMF Money Advisor. But don't take my word for it. Try it for free this month.)
If recent headlines about annuities raise your Spidey sense, good. Commission-based brokers (or agents) make their money each time they sell you a mutual fund, stock, bond or insurance product. But annuities are what really bring in the bacon.
My colleague Robert Brokamp -- he of Rule Your Retirement fame -- recently regaled me with some quotes from an article about "Annuity University," where agents go to learn how to push products to the silver-haired set: "Show them their finances are all screwed up so that they think, 'Oh, no, I've done it all wrong.' This will make you money. ... Toss hand grenades into the advice -- to disturb the seniors. You're there to solve their problems, but you have to create those problems first. No problem, no sale."
With training like that, it's no wonder the firms these brokers work for find themselves in recent headlines for overselling annuities.
Then there are tax scams, penny-stock huckster scams, Instant Messaging scams, Nigerian confidence scams, mortgage servicing scams, wrong-number pump-and-dump scams. I could go on, but this paragraph is already swathed in blue hyperlinks.
When to fire your pro
No matter where you seek financial advice, remember that it is your money -- and you are an at-will customer. In the end, you call all of the shots. If you encounter a third party who insists that you relinquish all the thinking to them (and that you give them "discretionary authority" to manage your money), then we humbly suggest that this may not be the best pro for you.
That's not the only reason you should consider laying off your financial counselor. When you ask questions of your pro, do you understand the answers? When you ask for clarification, does the subsequent explanation make more sense? If not, you might want to start interviewing other candidates.
Another warning sign:
If a life insurance salesperson seeks out your business offering a free consultation, say, "No thank you."
Unless you are specifically looking for stock picks, be wary of an advisor who is preoccupied with them. Also, any discussion of investments should involve risk. If you hear the words "Sure thing" or are offered "exclusive access" to an investment, run, do not walk, toward the exit sign.
Avoid any individual provider or firm principal who is not registered with the SEC or the state securities agency. Any person who provides financial planning services and manages investment assets of $25 million or more has to file Form ADV with the Securities and Exchange Commission. (Those who manage less than $25 million in assets must disclose similar information with their own state's security agency.) Along the same lines, any professional who sells securities will have a Central Registration Depository (CRD) file. It gives you a 10-year history of the provider, including any disciplinary actions taken against that person.
There are many reasons to seek the services of a paid financial advisor. (Here are 10 must-knows before hiring a pro.) And there are a lot of reasons to avoid certain ones.
Not everyone in the financial services industry is out to get you. But there's only one person who's truly got your back -- that's you.
Got any scams you want to warn others about? Let us know on our Financial Scams discussion board.
Dayana Yochim 's got a vicious dog to get her back when she's not paying attention. She owns none of the companies mentioned in this article. The Fool's disclosure policy has no hidden fees and isn't out to get anyone.
Reformed Wall Street financial planner Robert Brokamp writes the Motley Fool Rule Your Retirement newsletter to empower more folks to manage the future. Plus, he can point out a lot of the tricks the trade uses to part you with your precious retirement dough. If you'd like to see what the service is all about, you can start by taking a 30-day free trial . You'll enjoy access to back issues, interviews with authors and experts, retirement calculators, how-to guides, and the Fool's informed and helpful community of discussion board users. We don't care if you have $2,000 or $2 million in assets. but we hope to help you achieve your goals. Click here to learn more.
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